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FCA fined five individuals and two firms £15.5m for misconduct

By Yousouf Jhugroo 26 Jul, 2017

 

There are essential elements that can help a business organisations to make good progress and healthy growth without having to spend a lot on correcting mistakes after and be exposed to risk of hefty fines by regulators.

 

A business organisation must have a comprehensive Compliance Programme in place. Such programme must be based on trust. Trust is the backbone of any bsuness organisation. Business leaders often ignore the cost of a breakdown of trust with their stakeholders. Relationships with customers, staff, suppliers, partners and regulators are all based on trust. Any action that leads to a breakdown of this trust may result in disastrous consequences. Similarly, without a coherent and an effective compliance programme in place, this necessary trust may be severly compromised. Everyday we read in the news that companies are going down because they have made losses. One of the major causes relates to the absence of trust underpinning a coherent compliance culture.

 

 

The objective of a compliance programme must be to protect the business against high risk of non compliances. It is well known that once a fault is committed, all good deeds that an organisation may have done in the past to build up its reputation will be immediately cast aside and ignored.

 

Having a compliance programme in place helps. However, it is not going to solve any problem or prevent non compliances if it is not actively implemented, monitored, reviewed and maintained.

 

So, how exactly do you build a corporate compliance programme that safeguards the trust of your stakeholders in your organization? What in fact constitute the elements of an effective compliance programme?

 

Besides trust, it is essential that implementation of the programme is assigned to a leader. The ledadership must be capable of managing the programme and helping to integrate it within the operational functions of the organsiation. It means working with staff at all stages of the organisation, from top to bottom. It must have the top management buy-in and their indispensable commitments.

 

Leadership of the compliance programme must be based on transparancy as it will enhance the trust and ethics with your stakeholders and improve compliance governance. Transparency is achieved through regular communications with and active participation of all staff and internal customers, including suppliers.

 

Prior to developing and putting in place a new compliance programme it is essential to conduct a comprehensive organisational risk assessment. This can be executed by an internal or external team. Assessing risk will give your organisation confidence in its ability to manage an effective compliance programme, leaving no gaping holes or unaddressed compliance issues.

 

Training is another key element to promoting trust within the compliance management process. You must know what defines complete compliance and integrity in order to ensure that you have attained it. Only then are you able to manage your compliance.

 

 

The next ncessary elements to be considered are standards and controls. A successful business organisation must have acomprehensive set of standards and controls that helps in keeping your stakeholders on the same page. From leadership and staff to shareholders and customers, protocol in the event of possible noncompliances must be clear and understood by all.

 

Standards and controls bind the organisation’s culture. They both define and support the compliance culture. They are the fundamentals that educate your stakeholders about  compliance and encourage the behaviors that promote it.

 

Finally, the secret to keeping the compliance programme in line with business development is to ensure that it has management and board oversight from development to actual implementation process. The leader, who should be the Compliance Officer, should be accountable for overseeing the programme. He/she will help to ensure that your organisation is compliant with relevant regulations.

 

CRC- The Compliance Experts can assist any organisation to build these foundations and help with the developments of an effective compliance programme that builds trust in your organisation. We will also help in building the fundamental compliance processes that further mitigate the risks of noncompliances.

 

 

By Yousouf Jhugroo 21 Jul, 2017
When I talk to energy companies about the new regulations like REMIT, MAR, EMIR and MiFID 2 and the way they handle the compliance thereof, I often get the answer that their legal people are right on top of the latest developments and that they therefor don't need support in implementing a compliance framework. But unfortunately this way of thinking could prove to be a very costly mistake.
Why is that? To cut a long story short: compliance issues should not be handled similar like legal matters. The legal function is an intellectual exercise in understanding the technical nuances of a particular rule (or perhaps interpreting what one can “get away with”). Compliance isn’t simply an intellectual exercise; compliance is about embedding the applicable rules and market practices into your organization and your daily business environment.
Besides many significant regulatory requirements are concepts rather than specific rules. They contain some vague definitions or terms that leave room for interpretation. As a result most regulators prefer that management make a determination on what is “reasonable in the circumstances”. So compliance or enforcement risks don’t arise because of a failure to understand the technical nuances of a rule, but from a poor application of the rules and requirements within your organization
How could you avoid such application failures? First of all compliance is not an isolated function and certainly not the sole responsibility of the compliance officer. The compliance officer should be seen as a source of guidance, rather than a policing function. The development of compliance policies should be a shared responsibility that includes input from management and other staff on how the rule can best fit into your business. In this way you can be sure that the compliance policies and procedures do reflect your business realities and that these will be widely accepted across your organization.
Let's have a look at it from a negative perspective; if your internal compliance policies would not reflect the realities of your business, over time your staff might simply stop following them. This could cost you dearly if your company will become subject to an enforcement or legal action.
In our advisory practice we regularly come across a dangerous practice among small and mid-size firms. This practice has everything to do with costs. The bigger companies spend anywhere between 5% and upwards of 10% of their operating costs on compliance technology, headcount and strategy. For SME’s compliance requirements consume more than 10% of their total operating costs. As the cost of compliance is creating a heavier burden on these smaller firms, they understandably want to save money and time by copying or “borrow” compliance manuals and documents that were adopted by other firms such as other energy companies or financial institutions. However, a “borrowed” policies and procedures manual may not reflect recent regulatory changes and more importantly it may not reflect the firm’s circumstances.
This can be a huge risk, because in the event of an enforcement action by the regulator, the firm may find that it is questioned on why it is using a manual that effectively is irrelevant or outdated.
So the bottom line is that you as an energy trading company should invest time and effort necessary to develop compliance policies and procedures that fit your needs and circumstances. Although it is a significant initial investment it will save you a lot of money over time.
By Steven Rungasamy 04 Jul, 2017

The Babylonian King Hammurabi ruled for nearly 42 years, from circa 1792 to 1749 BC. He is credited with creating one of the earliest examples of a set of legal code/rules - the Hammurabi Code- that contained 282 rules. Modern humanity, in its 70,000 years of development has sought to establish rules so as to have a fundamental system of governance and constitution. But are rules and regulation necessary for the survival of the human society? And should we care about them?

Yes. We need them. Yes. We should care about them. Why? Because they save lives and livelihood, they protect businesses and they protect society as a whole.  

Let us take a couple of examples to illustrate this point. The first one relates to the April 1989 Hillsborough Stadium disaster in Sheffield, the worst stadium-related disaster in English sports history where 96 Liverpool fans were killed. The second coroner’s inquest has recently ruled that police and ambulance services failed to fulfill their duty of care and concluded that the supporters were unlawfully killed due to grossly negligent failures.

The more recent fatal and deeply regrettable fire blaze at Grenfell Tower in London on 14th June 2017 in the borough of Kensington and Chelsea, is the second example of failure to verify that the correct materials were used. The press report that that this human tragedy could have been avoided, had there been more regard for building and general health and safety (and fire) regulations. We have now reached a point where there might be separate investigations by the Police, the Health and Safety Executive, the Council and by the Central Government (through its enquiry), amongst others. What are the legal ramifications?

a) contractual claims

b) charges of Corporate Manslaughter to be potentially brought against certain parties

c) claims on grounds of negligence between parties

d) criminal investigations brought by the Health and Safety Executive and/or the Crime Prosecution Service      

Risk is costly

Everyone would have wanted to go back in time and do things differently in order to avoid this tragic loss of life. And in general there lies the central problem of compliance with regulations- risking it usually comes at an increasing cost. The cost is not just in monetary form but it can be damage to reputation, a merry-go-round of parties blaming each other, personal liability, the emotional stress of litigation, the loss of customers, the end of careers and the list is nigh endless.

 Many businesses are said to concern themselves primarily with the financial consequences of breaches of regulation. It is reported that the new regulations set by the EU for card payments may result in the regulator dishing out £122 billions in fines when they came into force in 2018. Compliance commentators are aware of the Morgan Stanley report, which worked out that companies in the financial industry, had faced lawsuits and/or fines up to the amount of £260 billions. We are in uncharted territory and risk is now truly costly for businesses.  

Avoiding the “deer caught in the headlight” moment

With increasingly complex legislations and compliance requirements, fortunately, there are also better systems and mechanisms for minimizing risks to organisations. These come in the form of firms set up to help clients achieve compliance without having to worry about that much-dreaded moment. The mission of CRC is to be the leading firm in this space.

 

Steven Noel Rungasamy

By Yousouf Jhugroo 29 Aug, 2016

There are essential elements that can help a business organisations to make good progress and healthy growth without having to spend a lot on correcting mistakes after and be exposed to risk of hefty fines by regulators.

 A business organisation must, at the start have a comprehensive Compliance Programme in place. Such programme must be based on trust. Trust is the backbone of any business organisation. Business leaders often ignore the cost of a breakdown of trust with their stakeholders. Relationships with customers, staff, suppliers, partners and regulators are all based on trust. Any action that leads to a breakdown of this trust will have disastrous consequences. Similarly, without a coherent and an effective compliance programme in place, this necessary trust may be severely compromised. Everyday we read in the news that companies are going down because they have made losses. On the majority of cases they relate to the absence of trust underpinning a coherent compliance culture.

The overall objective of a compliance programme is to protect the business against high risk of non compliances. It is well known that once a fault is committed, all good deeds that an organisation may have done in the past to build up its reputation will be immediately cast aside and ignored. It will always be remembered for that one fault.

Having a compliance programme in place helps. However, it is not going to solve any problem or prevent non compliances if it is not actively implemented, monitored, reviewed and maintained.

So, how exactly do you build a corporate compliance programme that safeguards the trust of your stakeholders in your organization? What in fact constitute the elements of an effective compliance programme?

Besides trust, it is essential that implementation of the programme is assigned to a leader. The ledadership must be capable of managing the programme and helping to integrate it within the operational functions of the organsiation. It means working with staff at all stages of the organisation, from top to bottom. It must have the top management buy-in and their indispensable commitments.

 Leadership of the compliance programme must be based on transparency as it will enhance the trust and ethics with your stakeholders and improve compliance governance. Transparency is achieved through regular communications with and the active participation of all staff and internal customers, including suppliers.

 Prior to developing and putting in place a new compliance programme it is essential to conduct a comprehensive organisational risk assessment. This can be executed by an internal or external team. Assessing risk will give your organisation confidence in its ability to manage an effective compliance programme, leaving no gaping holes or unaddressed compliance issues.

 Training is another key element to promoting trust within the compliance management process. Organisation must know what defines complete compliance and integrity in order to ensure that it has attained it. Only then can compliance be managed effectively.

 The next necessary elements to bear in mind are standards and controls. A successful business organisation must have a comprehensive set of standards and controls that helps in keeping its stakeholders on the same page. From leadership and staff to shareholders and customers, protocol in the event of possible noncompliances must be clear and understood by all.

 Standards and controls bind the organisation’s culture. They both define and support the compliance culture. They are the fundamentals that educate  stakeholders about  compliance and encourage the behaviours that promote it.

 Finally, the secret to keeping the compliance programme in line with business development is to ensure that it has management and board oversight from development to actual implementation process. The trained leader, who should be the Compliance Officer, accountability for overseeing the programme. He/she will help to ensure that the organisation is compliant with relevant regulations.

  CRC- The Compliance Experts can assist any organisation to build these foundations and help with the developments of an effective compliance programme that builds trust in your organisation. We will also train your staff and help in building the fundamental compliance processes that further mitigate the risks of noncompliances.

 

 

By Yousouf Jhugroo 03 Feb, 2016

The Financial Conduct Authority (FCA) has fined five individuals and two firms a total of £15.5m, in addition to banning four of those individuals, for significant integrity and competence failings.

The FCA found that Shay Reches performed the CF1 (Director (AR)) controlled function at Coverall Worldwide Limited (Coverall), with responsibility for a managing general agent, Aderia UK Limited (Aderia), and conducted regulated activities, which were central to setting up and operating these insurance schemes, despite not being approved by the FCA to do so. In doing so, Mr Reches recklessly directed payments of insurance premiums to parties other than the insurers and reinsurers responsible for paying claims, increasing the risk that policyholders’ claims would not be paid.

 This misconduct contributed to the failure of several insurance schemes as well as to three insurers going into administration. As a result, the Financial Services Compensation Scheme (the FSCS) has had to pay substantial claims, totalling £12.7m as at the end of 2015.

 The FCA has fined Mr Reches £1,050,000. Mr Reches has also agreed to pay a sum of £13,130,000 to the three insurers, which will make a substantial contribution towards the liabilities to the FSCS and UK policyholders. If he fails to pay this amount or any part of it, the fine will be increased by the amount unpaid. These payments to insurers will deprive Mr Reches of the indirect benefit that the FCA considers he has gained from his misconduct. Mr Reches has also been prohibited by the FCA from performing any function in relation to any regulated activity.

 Action was also taken against Colin McIntosh, Millburn Insurance Company Limited (Millburn), Coverall, Robert Bygrave, Andrea Sadler, Wayne Redgrave and Bar Professions Limited (Bar).            

 These actions were taken as a result of a joint investigation by the FCA and the Prudential Regulation Authority (PRA). The PRA will also be publishing Final Notices against Colin McIntosh and Millburn today.

 Mark Steward, director of enforcement and market oversight, said:

  "This was a hugely complex case with the FCA liaising with over 20 regulators and agencies around the world”.

 "Mr Reches’ misconduct led to many solicitors and others being left without adequate insurance. He treated policyholders’ funds and their interests with reckless indifference and his misconduct was facilitated by an absence of proper controls by key persons at important stages of the insurance process. The FCA has also taken action against those responsible for poor controls and oversight.

  "This case not only demonstrates the consequences of poor controls but also what can happen when the distribution chain becomes overly complex, participants fail to ask obvious questions or take rudimentary precautions, including those insurance intermediaries and brokers checking whether Mr Reches was approved to carry out the functions he was performing."

 

Background

 

The investigations followed early intervention action taken jointly by the FCA and PRA between July and September 2013 following concerns raised about the validity of solicitors’ professional indemnity insurance (Solicitors’ PII) arranged for over 1,300 solicitors’ firms across England and Wales. Without such insurance solicitors are unable to carry on business. As a result of that early intervention action, the regulated activities of the various entities were halted and client money had to be ring fenced.

 The insurance schemes that caused concern, and are the subject of today’s action, were all linked to Mr Reches. These schemes used binding authorities issued by a London-based managing general agent, Aderia, to various cover holders, including to specialist insurance broker, Bar, which sold Solicitors’ PII. Aderia was an appointed representative of a UK insurer, Millburn, and a UK insurance intermediary, Coverall.

 For this complex system to work, security needed to be available from a number of insurers and reinsurers based in the UK, Europe and offshore. The principal risk carrier, Sinclair Insurance Company Limited (Sinclair), is registered in the Union of the Comoros and owned and controlled by Mr Reches.

 The failings in the management oversight throughout these distribution chains and the failure of the reinsurance arrangements contributed to three of the insurers - Millburn, European Risk Insurance Company (ERIC) an Icelandic insurer, and Balva Insurance Company AAS (Balva) a Latvian insurer - going into administration, in part due to debts owed by Sinclair. As a result, they were unable to honour the insurance they had ultimately offered, through cover holders to solicitor customers and other policyholders, which risked those customers being left uninsured.


By Yousouf Jhugroo 28 Jan, 2016
In a resolution passed by the UE Commission Budgetary Control Committee today, MEPs urge EU member states to claw back EU funds lost through fraud or irregular spending.  The EU Commission is to use its executive powers to help member states to fight fraud and tax avoidance.   The Commission will assess member states’ corruption-fighting performance each year and will suspend payments in the event of spending irregularities.

Member states manage up to 80% of EU budget spending  in areas such as agriculture, growth and employment aid to EU regions (European Structural and Investment funds), though ultimate responsibility for this spending rests with the EU Commission. National governments are  responsible for protecting EU financial interests, which involves cooperation with the Commission and its Anti-Fraud Office (OLAF).

Key findings and requests  

Reported spending irregularities affected 1.8% of total payment. The impact of financial fraud and errors went up significantly in 2014, though the number of financial errors fell slightly.

In a press release issued today, the Commission notes that EU member states are  responsible for collecting EU own resources, in the form, inter alia, of VAT and customs duties. MEPs are concerned that the share of Traditional Own Resources (TOR) affected by fraud was 191% higher in 2014 than in 2013 and the amount affected by non-fraudulent irregularities was 146% higher. In 2013, reported fraudulent irregularities had affected 0.29 % of TORs (i.e. €61 million) and non-fraudulent ones 1.57 % (€327.4 million).

"   The average TOR recovery rate for 2014 was only 24% - an historic low. The recovery rate for 2013 had been 62% (€234 million) the best result in a decade. Member states must demonstrate firm political will to fight VAT fraud and tax avoidance, while the Commission should use its power to both check on and help member states to this end".  

Non-Compliance with public procurement still high

MEPs believe that simplifying administrative rules should reduce the number of non-fraudulent irregularities. The Commission is requested to release detailed information on best and worst-performing member states by policy area and by sector.

The number of irregularities due to non-compliance with public procurement rules remained high. MEPs point out that the new EU directives on public procurement must be implemented by April 2016.

MEPs urge the Commission to assess the planning, implementation and checking of the EU’s multiannual budget spending on the results-based budgeting principle and to focus on getting value for money from public spending.

MEPs reiterate their call for whistle-blower protection to be enacted.
The resolution will be voted by the full Parliament at the March plenary session in Strasbourg.
By Yousouf Jhugroo 25 Jan, 2016

In a statement issued yesterday the Financial Reporting Council (FRC) has announced that it will undertake a preliminary investigation into KPMG’s auditing of banking giant HBOS before its collapse in 2008.  

The purpose of the this preliminary investigation according to Gareth Rees, FRC’s Head of Enforcement, is to examine whether KPMG was guilty of misconduct after signing off HBOS’s books for 2007

The investigation will focus on KPMG’s use of the going concern assumption for HBOS’s 2007 accounts. It will seek find out whether the Big Four firm needed to disclose concerns about the bank’s continued sustainability in the financial statements.

The findings will be presented to the FRC’s conduct committee, whose members will then determine whether KPMG are liable for further investigation.

Should the Conduct Committee opt for a full inquiry, both KPMG and the accountants who worked on the HBOS statements could be held accountable and face punishment.

In their report issued last November, the PRA and FCA acknowledged that “ KPMG provided robust challenge and delivered clear warnings to HBOS which resulted in a more prudent approach to provisioning than would otherwise have been adopted”.

In February 2008, HBOS asked shareholders for £4bn to boost its finances before being rescued by a government-backed Lloyds in September. The Lloyds-HBOS bank nearly collapsed before being bailed out by the government the following month to the tune of circa £20n.


KPMG will co-operate…

 Following the announcement a KPMG spokesperson said they will  “continue to co-operate with the FRC as it makes its preliminary enquiries. In the interests of everyone, it is now important that final conclusions are reached in a timely fashion”.

“We were pleased that the PRA and FCA's report issued last November recognised that KPMG provided robust challenge and delivered clear warnings to HBOS”, continued the statement, “and that this resulted in a more prudent approach to provisioning than would otherwise have been adopted”.

FCA fined five individuals and two firms £15.5m for misconduct

By Yousouf Jhugroo 26 Jul, 2017

 

There are essential elements that can help a business organisations to make good progress and healthy growth without having to spend a lot on correcting mistakes after and be exposed to risk of hefty fines by regulators.

 

A business organisation must have a comprehensive Compliance Programme in place. Such programme must be based on trust. Trust is the backbone of any bsuness organisation. Business leaders often ignore the cost of a breakdown of trust with their stakeholders. Relationships with customers, staff, suppliers, partners and regulators are all based on trust. Any action that leads to a breakdown of this trust may result in disastrous consequences. Similarly, without a coherent and an effective compliance programme in place, this necessary trust may be severly compromised. Everyday we read in the news that companies are going down because they have made losses. One of the major causes relates to the absence of trust underpinning a coherent compliance culture.

 

 

The objective of a compliance programme must be to protect the business against high risk of non compliances. It is well known that once a fault is committed, all good deeds that an organisation may have done in the past to build up its reputation will be immediately cast aside and ignored.

 

Having a compliance programme in place helps. However, it is not going to solve any problem or prevent non compliances if it is not actively implemented, monitored, reviewed and maintained.

 

So, how exactly do you build a corporate compliance programme that safeguards the trust of your stakeholders in your organization? What in fact constitute the elements of an effective compliance programme?

 

Besides trust, it is essential that implementation of the programme is assigned to a leader. The ledadership must be capable of managing the programme and helping to integrate it within the operational functions of the organsiation. It means working with staff at all stages of the organisation, from top to bottom. It must have the top management buy-in and their indispensable commitments.

 

Leadership of the compliance programme must be based on transparancy as it will enhance the trust and ethics with your stakeholders and improve compliance governance. Transparency is achieved through regular communications with and active participation of all staff and internal customers, including suppliers.

 

Prior to developing and putting in place a new compliance programme it is essential to conduct a comprehensive organisational risk assessment. This can be executed by an internal or external team. Assessing risk will give your organisation confidence in its ability to manage an effective compliance programme, leaving no gaping holes or unaddressed compliance issues.

 

Training is another key element to promoting trust within the compliance management process. You must know what defines complete compliance and integrity in order to ensure that you have attained it. Only then are you able to manage your compliance.

 

 

The next ncessary elements to be considered are standards and controls. A successful business organisation must have acomprehensive set of standards and controls that helps in keeping your stakeholders on the same page. From leadership and staff to shareholders and customers, protocol in the event of possible noncompliances must be clear and understood by all.

 

Standards and controls bind the organisation’s culture. They both define and support the compliance culture. They are the fundamentals that educate your stakeholders about  compliance and encourage the behaviors that promote it.

 

Finally, the secret to keeping the compliance programme in line with business development is to ensure that it has management and board oversight from development to actual implementation process. The leader, who should be the Compliance Officer, should be accountable for overseeing the programme. He/she will help to ensure that your organisation is compliant with relevant regulations.

 

CRC- The Compliance Experts can assist any organisation to build these foundations and help with the developments of an effective compliance programme that builds trust in your organisation. We will also help in building the fundamental compliance processes that further mitigate the risks of noncompliances.

 

 

By Yousouf Jhugroo 21 Jul, 2017
When I talk to energy companies about the new regulations like REMIT, MAR, EMIR and MiFID 2 and the way they handle the compliance thereof, I often get the answer that their legal people are right on top of the latest developments and that they therefor don't need support in implementing a compliance framework. But unfortunately this way of thinking could prove to be a very costly mistake.
Why is that? To cut a long story short: compliance issues should not be handled similar like legal matters. The legal function is an intellectual exercise in understanding the technical nuances of a particular rule (or perhaps interpreting what one can “get away with”). Compliance isn’t simply an intellectual exercise; compliance is about embedding the applicable rules and market practices into your organization and your daily business environment.
Besides many significant regulatory requirements are concepts rather than specific rules. They contain some vague definitions or terms that leave room for interpretation. As a result most regulators prefer that management make a determination on what is “reasonable in the circumstances”. So compliance or enforcement risks don’t arise because of a failure to understand the technical nuances of a rule, but from a poor application of the rules and requirements within your organization
How could you avoid such application failures? First of all compliance is not an isolated function and certainly not the sole responsibility of the compliance officer. The compliance officer should be seen as a source of guidance, rather than a policing function. The development of compliance policies should be a shared responsibility that includes input from management and other staff on how the rule can best fit into your business. In this way you can be sure that the compliance policies and procedures do reflect your business realities and that these will be widely accepted across your organization.
Let's have a look at it from a negative perspective; if your internal compliance policies would not reflect the realities of your business, over time your staff might simply stop following them. This could cost you dearly if your company will become subject to an enforcement or legal action.
In our advisory practice we regularly come across a dangerous practice among small and mid-size firms. This practice has everything to do with costs. The bigger companies spend anywhere between 5% and upwards of 10% of their operating costs on compliance technology, headcount and strategy. For SME’s compliance requirements consume more than 10% of their total operating costs. As the cost of compliance is creating a heavier burden on these smaller firms, they understandably want to save money and time by copying or “borrow” compliance manuals and documents that were adopted by other firms such as other energy companies or financial institutions. However, a “borrowed” policies and procedures manual may not reflect recent regulatory changes and more importantly it may not reflect the firm’s circumstances.
This can be a huge risk, because in the event of an enforcement action by the regulator, the firm may find that it is questioned on why it is using a manual that effectively is irrelevant or outdated.
So the bottom line is that you as an energy trading company should invest time and effort necessary to develop compliance policies and procedures that fit your needs and circumstances. Although it is a significant initial investment it will save you a lot of money over time.
By Steven Rungasamy 04 Jul, 2017

The Babylonian King Hammurabi ruled for nearly 42 years, from circa 1792 to 1749 BC. He is credited with creating one of the earliest examples of a set of legal code/rules - the Hammurabi Code- that contained 282 rules. Modern humanity, in its 70,000 years of development has sought to establish rules so as to have a fundamental system of governance and constitution. But are rules and regulation necessary for the survival of the human society? And should we care about them?

Yes. We need them. Yes. We should care about them. Why? Because they save lives and livelihood, they protect businesses and they protect society as a whole.  

Let us take a couple of examples to illustrate this point. The first one relates to the April 1989 Hillsborough Stadium disaster in Sheffield, the worst stadium-related disaster in English sports history where 96 Liverpool fans were killed. The second coroner’s inquest has recently ruled that police and ambulance services failed to fulfill their duty of care and concluded that the supporters were unlawfully killed due to grossly negligent failures.

The more recent fatal and deeply regrettable fire blaze at Grenfell Tower in London on 14th June 2017 in the borough of Kensington and Chelsea, is the second example of failure to verify that the correct materials were used. The press report that that this human tragedy could have been avoided, had there been more regard for building and general health and safety (and fire) regulations. We have now reached a point where there might be separate investigations by the Police, the Health and Safety Executive, the Council and by the Central Government (through its enquiry), amongst others. What are the legal ramifications?

a) contractual claims

b) charges of Corporate Manslaughter to be potentially brought against certain parties

c) claims on grounds of negligence between parties

d) criminal investigations brought by the Health and Safety Executive and/or the Crime Prosecution Service      

Risk is costly

Everyone would have wanted to go back in time and do things differently in order to avoid this tragic loss of life. And in general there lies the central problem of compliance with regulations- risking it usually comes at an increasing cost. The cost is not just in monetary form but it can be damage to reputation, a merry-go-round of parties blaming each other, personal liability, the emotional stress of litigation, the loss of customers, the end of careers and the list is nigh endless.

 Many businesses are said to concern themselves primarily with the financial consequences of breaches of regulation. It is reported that the new regulations set by the EU for card payments may result in the regulator dishing out £122 billions in fines when they came into force in 2018. Compliance commentators are aware of the Morgan Stanley report, which worked out that companies in the financial industry, had faced lawsuits and/or fines up to the amount of £260 billions. We are in uncharted territory and risk is now truly costly for businesses.  

Avoiding the “deer caught in the headlight” moment

With increasingly complex legislations and compliance requirements, fortunately, there are also better systems and mechanisms for minimizing risks to organisations. These come in the form of firms set up to help clients achieve compliance without having to worry about that much-dreaded moment. The mission of CRC is to be the leading firm in this space.

 

Steven Noel Rungasamy

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